A group of 23 Democratic US senators sent a letter Friday to the top federal regulator overseeing prediction markets, urging the agency to avoid weighing in on pending court cases over the legality of offerings on the platforms tied to “sports, war, and other prohibited events.”
Prediction markets, which sell contracts tied to the outcome of real-world developments, have exploded in popularity over the past year, attracting an increasingly mainstream fanbase eager to wager on everything from geopolitical conflicts to fashion choices to the Super Bowl. As they expanded, the platforms have become a magnet for ethical and legal controversies. On Thursday, for example, Israeli authorities announced that two people had been arrested on suspicion of using classified military information to place bets on Polymarket, one of the biggest players in the industry.
The letter from the senators reflects a growing divide over how Polymarket and competitors like Kalshi should be handled. The US government currently considers prediction markets to be derivative markets, which means they fall under the jurisdiction of the Commodity Futures Trading Commission. But state authorities, who have emerged as some of the industry’s staunchest critics, are arguing the platforms should be subject to the same local regulations as gambling products.
There are at least 19 ongoing federal lawsuits challenging Kalshi’s legality, according to an analysis by National Public Radio. In one case in Massachusetts, a judge banned the company from offering sports contracts after the state sued it for operating without a gambling license. Polymarket then filed a counter lawsuit against Massachusetts arguing that state regulators don’t have authority over its business.
In his first public remarks about prediction markets since taking office in December, CFTC chairman Michael Selig suggested that the agency might wade into the battles, noting that it has the “expertise and responsibility to defend its exclusive jurisdiction.”
Now, a cadre of senators led by California’s Adam Schiff are urging the CFTC to stay out of the state lawsuits. Their letter also asks the agency to bar prediction markets from offering gaming contracts, as well as contracts involving “war, terrorism, assassination, or other enumerated activities.” The signatories include Cory Booker, Amy Klobuchar, and Ron Wyden. The CFTC did not respond to requests for comment.
During the Biden administration, the CFTC attempted to put guardrails on some aspects of prediction markets. In 2024, for example, the independent agency proposed banning the sale of some types of contracts, including those involving sports and politics.
But under the Trump administration, the CFTC has taken a radically different approach. After Selig took over in December, the CFTC quickly withdrew the ban proposal and established a new advisory board that includes the chief executives of all the largest prediction market companies. And when former New Jersey governor Chris Christie suggested on social media this week that prediction markets are violating the law, Selig issued a terse response: “Strong disagree.”
Speaking on Bloomberg’s Odd Lots podcast this week, Selig elaborated on his vision for regulating the industry, rejecting the notion that prediction markets should be seen as equivalent to sports gambling. “These are not wagers—you’re not betting against the house,” he said. “We have significant overlay from a regulatory standpoint over these markets. And so we’re not gatekeeping particular categories of markets, elections, or sports by having different standards.”
In their letter, the senators urged Selig to change course. “These products evade state and tribal consumer protections, generate no public revenue, and undermine sovereign regulatory regimes,” the senators wrote.
Meanwhile, advocates for the prediction market industry say that the CFTC is already on the right track. “We think that the chairman is exactly right in asserting the exclusive jurisdiction of the agency over the state,” says former US representative Sean Patrick Maloney, who now heads the lobbying group the Coalition for Prediction Markets. “No state gaming commission is ever going to have the competence to provide oversight of derivatives markets generally.”
As the regulatory fight over prediction markets continues to unfold, more companies are racing to get in on the action. A number of online sports gambling companies including DraftKings have recently unveiled their own offerings. Truth Social, the social media company majority-owned by President Donald Trump and his family, is also prepping its own product, Truth Predict. Expected offerings include opportunities to “events across all major sports leagues.”